Andersons Inc (ANDE) 2015 Q4 法說會逐字稿

Good day, ladies and gentlemen, and welcome to The Andersons, Incorporated Q4 2015 earnings conference call. (Operator Instructions) As a reminder, this conference call is being recorded.

I would now like to introduce your host for today's conference, Mr. Jim Burmeister, Vice President, Finance, and Treasurer. Sir, you may begin.

Thank you, Chanel. Good morning, everyone, and thank you for joining us for The Andersons fourth-quarter and full-year 2015 conference call.

For the purposes of today's discussion, we have provided a slide presentation that will enhance our talking points. If you are viewing this presentation via our webcast, the slides and audio will be in sync. This webcast and supporting slides are being recorded and will be made available on our investor relations section of our website at andersonsinc.com.

Certain information discussed today constitutes forward-looking statements, and the actual results could differ materially from those presented in the forward-looking statements as a result of many factors including general economic conditions, weather, competitive conditions, conditions in the Company's industries both in the United States and internationally, and additional factors that are described in the Company's publicly filed documents, including its 1934 Act filings and the prospectuses prepared in conjunction with the Company's offerings.

Today's call includes financial information for which the Company's independent auditors have not completed their review. Although the Company believes that the assumptions upon which the financial information and its forward-looking statements are based are reasonable, it can give no assurance that the assumptions will prove to be accurate.

This presentation and today's prepared remarks contain non-GAAP financial measures. Reconciliations of the non-GAAP to GAAP measures may be found within the financial tables of our earnings release.

Adjusted pretax income attributable to The Andersons is our primary measure of period-to-period comparisons, and we believe it is a meaningful measure for investors to compare our results from period to period. We have excluded nonrecurring items and items that we believe are not representative of our ongoing operations when calculating this adjusted pretax income.

On the call with me today are Pat Bowe, Chief Executive Officer; and John Granato, Chief Financial Officer. Pat, John and I will answer questions that you may have at the end of the prepared remarks.

Now I will turn the floor over to Pat for opening comments. Pat?

Thank you, Jim, and good morning, everyone. Thank you for joining our call today to discuss our fourth-quarter and full-year 2015 results.

Revenues for The Andersons for 2015 were $4.2 billion, slightly lower than the $4.5 billion last year, on lower commodity prices. Full-year adjusted pretax income was $76.1 million compared to $158.2 million (sic - see slide 5, $154.2 million) in the prior year, primarily due to lower ethanol margins and weaker performance in our grain and plant nutrient groups.

I'm pleased to note a bright spot in our rail group, which completed its most profitable year ever, producing $50.7 million of pretax income compared to $31.2 million last year.

Our ethanol group performed very well in an extremely challenging energy market. The group set records for production volumes in the fourth quarter and for the full year, producing 101 million gallons and 384 million gallons, [respectfully].

Despite experiencing the pressure of steadily dropping oil prices on margins, the group delivered $28.5 million of pretax income for the year, a good result but well below the record profits seen in 2014 when the group earned $92.3 million.

2015 was a challenging year for our agricultural groups as they navigated difficult market conditions and worked to improve the operation of certain underperforming locations. Excessive rains in the Eastern Corn Belt in May and June dealt us a double blow, with fields too wet to get in for nutrient application in the spring and giving rise to much lower crop production in many of our markets in the fall.

Our plant nutrient group finished with full-year volumes lower by double digits from the prior year, and pretax income of $5.9 million compared to $23.8 million last year.

In addition to low sales volumes, the group's results were lower by $10.1 million due to the acquisition of Nutra-Flo, a low-salt liquid fertilizer and micronutrient producer. About half of these costs were one-time, deal-related costs with the remainder being the added operating costs of the new assets. As a reminder, Nutra-Flo's sales and earnings are very seasonal, with the majority occurring during planting season, which was before we acquired the business in 2015.

Our grain group had a very challenging year, generated adjusted pretax income of $15.2 million compared to $43.8 million a year ago. Our base grain assets struggled. Although some improvement was seen in the performance of our Western Corn Belt assets, we did not see as much improvement as we had planned. The impact of excessive rains and resulting weak yields in the Eastern Corn Belt, coupled with slow movement off the farm, significantly reduced earnings.

Our affiliates also encountered difficult market conditions. Lansing Trade Group reported losses related to parts of their energy-related business and lower export margins, driven by a strong dollar and a constricting Chinese market.

The year was also one of significant transition, as Mike Anderson stepped down as the Chief Executive Officer after 16 years of strong leadership. It is an honor to join the Company as the new CEO, and we are fortunate to have Mike continuing on as the Chairman of our Board of Directors.

I'll speak later in the call about our outlook for 2016 and some of the actions we are taking to improve our performance levels this year and for the longer term.

John will now walk you through a more detailed review of our financial results.

Thanks, Pat, and good morning, everyone.

In the fourth quarter of 2015 the Company generated a net loss attributable to The Andersons of $47 million, or $1.68 per diluted share, on revenues of $1.2 billion. This compares to the fourth quarter of 2014 when our revenue of $1.3 billion generated net income of $25.9 million, or $0.89 per diluted share.

For the year there was a net loss attributable to The Andersons of $13.1 million, or $0.46 per diluted share. This compares to the $109.7 million earned in the same period of the prior year, or $3.84 per diluted share.

Adjusted pretax income for 2015 was $76.1 million compared to $154.2 million in the prior year. Adjusted net income for 2015 was $41.2 million, or $1.45 per diluted share, compared to $99.1 million, or $3.46 per diluted share, in 2014.

Fourth-quarter 2015 adjusted pretax income was $20.1 million compared to $37.5 million in the fourth quarter of 2014.

Slide 6 provides a walk from reported pretax income to our adjusted pretax income for both 2014 and 2015.

In the first quarter of 2014 the Company recognized a gain of $17.1 million related to the partial redemption of its ownership in the Lansing Trade Group. Deducting this gain resulted in 2014 adjusted pretax income of $154.2 million and adjusted net income of $99.1 million, or $3.46 per diluted share.

In 2015 there are four adjustments to reconcile reported pretax income to adjusted pretax income. We added back the $51.4 million charge associated with the termination of our defined benefit pension obligation in the fourth quarter. We also added back the goodwill impairment of $56.2 million, which was partially within our grain group, as well as the $4.9 million one-time cost associated with the acquisition of Nutra-Flo. Finally, we adjusted out the $23.1 million gain recognized as part of the partial sale and redemption of our ownership in the Lansing Trade Group.

This results in an adjusted pretax income of $76.1 million for 2015 compared to the reported $13.3 million pretax loss.

Next we have provided bridge graphs comparing year-over-year results for fourth-quarter and full-year adjusted pretax income.

In the fourth quarter we saw improved year-over-year adjusted pretax income from the rail and plant nutrient groups, as well as reduced costs from corporate and other. These were more than offset by lower income from methanol and a significant drop in the grain group's performance.

Full-year results showed a $19.2 million improvement in the rail group year over year and smaller improvements in corporate and retail which were more than offset by the reductions in the ethanol, grain, and plant nutrient groups.

Rail group had a strong finish to the year, generating $6.8 million of pretax income in the fourth quarter compared to $5.6 million last year. Full-year results were $50.7 million compared to $31.4 million for the same period last year.

This year's record performance was driven by improved lease income from a sizeable settlement in the second quarter and the high utilization rates throughout the year. Utilization rates averaged 92.4% for the year compared to 89.5% in the prior year. Improved performance in our repair business helped with services income by $3.9 million versus last year, which was partially offset by $2.5 million of lower profit from railcar sales.

The ethanol group performed well in a year filled with many market challenges. Steadily weakening oil and gas prices put pressure on margins throughout the fourth quarter and full year. Additionally, our eastern facilities saw higher corn prices due to this year's poor crop production in the Eastern Corn Belt.

Despite these challenges the group turned in good results, with pretax income in the fourth quarter coming in a $7.7 million. This compares to the $17.3 million last year when margins were still running at record levels. Full-year pretax income was $28.5 million, well off the record $92.3 million in 2014, but a good performance in a tough market. The group continues to focus on driving even greater operational efficiencies to achieve higher yields and lower costs.

Our grain group had one of its most difficult years in recent history. The group delivered adjusted pretax income of $9.8 million in the fourth quarter and $13.9 million for the full year compared to $24 million and $41.1 million for the same periods in the prior year.

Base grain had limited space income opportunities as crop production in our [corn] markets was poor. The wet planting season limited nutrient application and acreage planted, resulting in lower crop production. Adjusted pretax income for base grain was $6.2 million in the fourth quarter and $600,000 for 2015 compared to $17.2 million and $15 million for the same periods in the prior year.

Grains affiliates, Lansing Trade Group and Thompsons Limited, delivered combined pretax income of $3.6 million in the fourth quarter and $13.2 million for the year compared to $6.8 million and $26.1 million for the same periods in the prior year.

As I previously discussed, the grain group's GAAP pretax income includes a $46.4 million charge in the fourth quarter from the impairment of goodwill, which was offset in part by a $23.1 million gain from the partial redemption and dilution of The Andersons' ownership in Lansing Trade Group. We have adjusted both of these items out for purposes of comparability.

Next is our plant nutrient group. We saw improved results in the legacy business, improving fourth-quarter adjusted pretax income from $500,000 in 2014 to $3.1 million in the fourth quarter of 2015. Full-year results were lower on the impact of excessive rains in the second quarter, coming in at $20 million compared to $24.5 million in the prior year.

We expanded our disclosure for Nutra-Flo this quarter and the full year, breaking out its operating pretax income from the legacy plant nutrient business and the nonrecurring costs associated with the acquisition. Nutra-Flo had a $1 million pretax loss for the fourth quarter and a loss of $5.2 million since being acquired in May of 2015. Sales and profits for the acquired product lines are heavily skewed to the spring planting season. We expect Nutra-Flo to be accretive in 2016.

The retail group posted results for the fourth quarter that were consistent with the prior year, achieving a pretax gain of $1 million. For the full year they reduced their loss slightly from $600,000 in 2014 to $500,000 in 2015.

I'll now turn the call back over to Pat for a few comments on our outlook for 2016.

Thanks, John.

As we look forward to 2016 we have a strong focus on improving overall Company results, with continued focus on bringing value to our customers. Specifically, we are focused on managing costs and improving margins.

Rail is coming off a record year into a market where slowing rail traffic in some sectors and economic uncertainty could potentially weigh our performance of the group.

That said, the business is positioned with a highly diversified portfolio of lease customers spanning a wide variety of equipment types and customer industries. Our portfolio is balanced in the timing of when leases roll over and, as such, less impacted by short-term weakness in the rail industry.

Market conditions in ethanol are very challenging in the first quarter of 2016, as oil and gasoline prices put downward pressure on margins. But we believe our facilities are well positioned geographically and we have proven, efficient technology to navigate these market conditions. We do expect some additional pressure early in the year driven by higher corn prices in the [drought] areas of our eastern plants.

The grain group's performance was below our expectation in 2015. We estimate corn acres that will be planted in 2016 to be 90 million acres, up 2% from 2015. Soybean acres are estimated to be 84 million, up 2% as well from last year. Wheat acres planted have been reported down approximately 3 million acres for this year. Assuming normal weather conditions and a return to trend yields the fall harvest should present a good opportunity for our grain group in the second half of 2016.

We've done enough work to determine that the Iowa assets have value and have seen some improved performance there. We're working to determine if we are the best owners or if there is a better fit in the marketplace.

We're pleased to welcome Corey Jorgenson as the new president of our grain group this month. The group has well positioned grain assets. We need to do a better job realizing volume and margin potential this year.

We're looking forward to 2016 in our plant nutrient group. Expected planting acres bodes well for the nutrient sales this spring planting season. We anticipate seeing a positive lift from Nutra-Flo as we get into their peak sales season in the second quarter. We see a continued need for specialty nutrients to support precision agriculture in the US and believe we provide a broad line of value-added products to support our farming customers.

This is my first conference call as CEO. I've been at The Andersons for just three months now and I'm very committed to our employees, customers, and shareholders. This is a difficult time for the Company, but I've been very impressed with the resolve, commitment, and experience of our team. I'm focused on driving improved performance and accountability throughout the Organization. I'm also excited about our ability to attract new, talented leaders to the Company.

I look forward to getting to know all of you and working closer together.

I'll now hand it back to our operator so we can take your questions.

Thank you. (Operator Instructions) Farha Aslam; Stephens Incorporated.

Pat, since this is your first call and given that you come from such a value-added kind of food and ingredients background, was one of the thoughts that you would take The Andersons portfolio over time to be more forward-integrated?

Thanks for the question, Farha. Just to reference it a little bit -- so I have 35 years of experience in the ag industry. And the first part of my career was in the grain business, as a grain merchant. Also worked at the Chicago Board of Trade. So a lot of my experience is in cash grain merchandising, which I'm still very bullish on as a business for the long term for The Andersons.

Having said that, if there's opportunities and white space for us to bolt on or move up the chain in our business, we'll look at those. But I feel pretty good about the existing portfolio we have.

That's helpful. And just one follow-up on the ethanol industry. Could you share with us your thoughts about the intermediate outlook for ethanol, how you expect it to develop over the years and then what you expect is needed to fix that business?

Yes, good question. So far this year our realized margins for ethanol have been below breakeven, but cash positive. We expect to see a slight loss in the first quarter, as I mentioned earlier, about some higher basis levels in the Eastern Grain Belt that we have.

But as we move into the second quarter, the industry's scheduled plant maintenance will start to kick in. We also expect to see increasing driving miles, with these low gas prices as we head into the summer. So we expect to see a margin improvement the second half of the year.

That's helpful. Thank you.

Brent Rystrom; Feltl and Company.

Quick thought -- so looking at the weather and thinking about how the weather statistically can influence things -- and I know with your background you're probably much better versed with this than I am. But having just had a strong El Nino statistically we have very high odds of a strong La Nina developing. There's been a lot of visibility for this the last couple of weeks, with people coming up with forecasting models showing that there's a very strong possibility.

If we get a strong La Nina and we get hotter and drier weather within the corn belt, with your focus on cost and margins, how would that adapt to handle maybe a shorter supply of corn, soybeans, and wheat and maybe much higher price?

Brent, thank you for your question. So, been around the grain business a long time. There's one adage I always heard a lot was "rain makes grain". And so we have a very good winter condition. So we like the position that the crop conditions are in nationwide. So we're starting off from a good spot. That's important.

If there is a La Nina occurrence and we get a hot, dry impact in the key growing cycle of the summer and spring, of course that will impact the crops. I think we all don't know exactly if that were to happen. It's a possibility. As you said, there's different models that suggest different weather patterns.

I think the key thing we can control is our costs and the position of our assets and how we work with the farmers. A big part of our business is helping farmers manage price risk and working with them on pricing tools and on crop nutrient to get the very best production out of their farms. So I think we provide a unique solution there, and that's a big part of our focus.

Of course a bigger grain crop is always better for our handle, so we'd love to see a bumper crop this year. But the biggest thing we could do is focus on our ability to work with farmers and have our assets in a good position to be in place for harvest.

All right, thank you. And then quick second question -- how should we think about timing for the plant nutrient group this year? I would assume that the first quarter's kind of a nonevent and the second quarter you should see a better application season.

Right.

And then for fall applications, can you remind us how the fall applications look November/December?

Yes. I think you've made a very good point. This has been a very interesting year with falling fertilizer prices. And we're just starting to see the market start to book now. It's a little later than normal, as farmers were waiting to make their price decisions. But the planted acreage number that looks bigger will be a help and good application weather in the fourth quarter. But the farmers have been reluctant to buy early. We're now started to see this market starting to ship and the pipeline will need to be filled here in the coming weeks.

So I think you made a very good point. It's going to be tough here in the first quarter. But we're pretty optimistic about the second quarter.

Thank you.

Heather Jones; BB&T Capital Markets.

This is actually Omar filling in for Heather. My first question relates to the rail business. I was hoping you could help me better understand how that segment is positioned, given the weaker traffic backdrop. I know you mentioned that renewal rates are holding up at good levels in most sectors.

But I was just trying to better understand how much deterioration, if any, we should expect in average lease rates this year, and what proportion of your lease portfolio is insulated from the deteriorating traffic trends we're seeing.

Omar, this is John. If you look at our portfolio, our leases average between kind of three and five years. So the second part of your question, about 20% of our portfolio turns over during a given year. And conversely, 80% does not turn over.

So there's a portion that is subject to some of the softness we're seeing. We've seen rail traffic down compared to last year about 14% through early February. When you take out coal, it's still down about 6%. So we would expect some potential impact. But overall we're feeling okay about our business.

Thank you very much. That's very helpful. My second question relates to corporate expense. I was just trying to get a little bit of color there. How should we think about it this year? And when should we expect to see the SAP implementation cost debate? Thanks.

Overall, SAP should be relatively steady in the other sector, which we report separately. We're expecting it to be flat relative to 2015.

When you look at operating, administrative, and general expenses, they were up this year. They're primarily up due to higher labor and benefits costs associated with our Kay Flo and AB&G acquisitions. We also have higher depreciation, amortization and maintenance associated with those. We did have some offsets this year related to utilities and reduced performance incentives.

So as we look to next year, or this year coming up, 2016, obviously, as Pat alluded, we need to drive costs out of our system. But more importantly, we need the assets that we've acquired to perform at a level that we would expect.

Thanks. That's very helpful. And lastly, just wanted to follow up on a comment you guys made about some of the Iowa assets and you were going to determine throughout the year if you guys were the correct owners for those assets. What sort of level are we talking here about? What would make you decide whether or not to hold onto those assets going forward? We're just looking to better understand how you are thinking here. Thanks.

Thanks, Omar. This is Pat again. I can't comment specifically on that, but as we noted in the call, we've done enough work here evaluating the Iowa assets that they have value. And we've seen improved performance this year, although it's a little bit behind what we'd like to see. So we're still working to see if we're the best owners or if there's other alternatives. So that's in progress.

Very helpful. Thank you.

Eric Larson; Buckingham Research.

Welcome, Pat. It'll be good to work with you in the years going forward. So, congratulations.

Thank you.

Couple questions, one related to the last question. Are your issues with Western assets isolated strictly to Iowa? Or is your new -- your storage facility, grain merchandising facility, in Nebraska still underutilized and there's potential for that to get better as well? Can you kind of frame that? I would assume that the majority of your goodwill impairment charge this quarter, or last quarter, was for Iowa assets.

Thanks, Eric. And glad to have a call from a fellow Minnesotan.

I did want to comment on that. So we had talked -- when we said Western assets we were more particularly talking about Iowa, not our Nebraska assets, which we feel comfortable with how we're performing in Nebraska. It's not really appropriate for us to talk about the specific values of those assets. Overall conditions of goodwill are related to overall performance of our grain group and not really particular to one particular asset.

Okay. And then, when you look at -- and this is just more from a clarity standpoint. When I look at your plant nutrient business for the year, Nutra-Flo was and is highly, highly seasonal and just a huge vast majority of your sales are in that kind of late Q1, starting late Q1 and mostly Q2.

Given the nature of their sales, will that drag -- when you look at the modeling of that, will that hurt your third-quarter and fourth-quarter numbers in general, too? You'll get the bulk of the accretion in Q2, but does it penalize Q3/Q4 earnings?

Eric, this is John. I think that's probably correct. Obviously you've got the costs associated with running the Nutra-Flo business that will impact the third and the fourth quarters. And the vast majority of Nutra-Flo does come in the planting season. So I think that's accurate.

Okay. And then, I know, Pat, you're very early on in your tenure at The Andersons. And you're probably formulating a lot of different strategies. But looking at what's happening today in the ag sectors, we all know it's a pretty rough world out there right now.

It also creates opportunities. Given the fragmentation in the grain storage business, your merchandising background, is there a reason to believe that there could be good opportunities over the next year or two to actually pick up assets that have good values now, particularly given the sort of fragmented nature of the storage industry?

Thanks, Eric. It's a very good point and one we think about quite a bit. So, as you know, our balance sheet is in very solid shape. We're positioned to be able to make acquisitions should the right properties come along.

We like businesses to be really nice fits for us from not only a geographic standpoint but from a ability to work with farmers in that region. As you know, we're building another asset in Tennessee. We've had good success in our development of our presence in Tennessee. Other parts of the geography that would be good fits for us in the grain belt could be attractive. And as you mentioned, things are pretty difficult, so that creates some disruption in the marketplace.

So we're actively looking for the right things that fit The Andersons. A big part, as I mentioned, is also our marketing and providing solutions to farmers. And as we want to continue to work on that to bring good risk management tools and other services to the growers that they're desperately going to need when you have tough economic conditions in the Farm Belt.

So, we're looking to do both.

Okay, good. And then my final question is a slide that was not included in your deck this time which you've talked about in the past, and that is looking at what your profit per bushel is in the grain business. And you've historically had a range of anywhere from $0.15 to $0.35 a bushel. In looking at the basis numbers, I'm assuming you were pretty well below that $0.15 historical range for 2015.

Can you give us any kind of a reasonable read as to how 2016 might look? And I know Q1's going to be a pretty tough start. I think we're all aware of that.

Eric, this is Jim. As you can imagine, with the crop year persisting at least into the first half, this year will be challenged and will likely put us below that range. That chart is available, by the way, in the appendix to the deck when you go back on line to get it from our investor site.

Okay. I didn't see that. Okay. Thank you, gentlemen.

Ken Zaslow; Bank of Montreal.

So, Pat, everybody's been asking you kind of about [how bad] the asset sales and stuff like that, but let me ask you a different question on this. As you go through the assets that you have, are there opportunities for you to do something different to change how the business is done? Is there a way that you could effect change within the business and can you talk about what you can do?

Yes, I think that's a fair question. When you look at our portfolio of assets, obviously there's some we have grown out of a real stronghold in the Eastern Grain Belt. We like that position and want to continue to strengthen that. We like the entrance into Tennessee, as I mentioned earlier.

We have good presence that we've been -- in key grain markets for many, many years. We'd like to continue to expand that presence. And then, again, as I said earlier, building that relationship with the farmers not only to buy their grain, but to sell them services as well as plant nutrient products. I mentioned earlier in Eric's question about grain assets, but also could be opportunities in plant nutrient that fits our portfolio well.

So I think we need to understand where we're strong and build on that strength and be careful when we venture out into areas that are too far away from that strength. But there's going to be some opportunities we feel in the next few years to look at assets that might fit really nice into our portfolio.

But there's no, like, incremental systems that you think, there's no integration, there's no operational improvements, anything that you -- coming from the outside obviously you see this organization. It's been together and it's done very successfully. But from an outsider's point of view you don't see there's anything, restructuring or something, to do within it that your eyes bring a new flavor to?

I appreciate the comment. And, yes, that's a big part of my focus, on performance and driving accountability throughout the Company. We need leaner operations and have really high performance levels. But, just been here 90 days. But we need to have the right people in the right places to drive productivity across the whole Company and return our grain and plant nutrient business to the expected performance levels that they've had in the past.

So I think there's plenty of opportunities to be smart, get leaner, and improve our performance. And that's my top focus.

And my final question is -- you said that there's a good opportunity in the grain in the second half of 2016. Does that translate to normalized numbers or is that still a little, you know -- how do you think about that?

Ken, I think if you look at the crop year for 2016, 2017, as we look out I think we hope, given a strong planting and a good harvest that we would get back to that normalized level in the second half of 2016, primarily during harvest and as we look to the early part of 2017.

So we're seeing 90 million acres of corn planted, 84 million acres of beans. If we have normal weather, good yield trends, I think in that second half we should be in good shape. You combine that with the strong US dollar and limited exports, then that should help drive value to our space in the harvest period coming up. So, yes, I think it's possible. We'll have to wait and see.

I think the other thing we have to point out that we talked a little bit about is moisture content in the soil, it looks pretty good. It's not too wet. It's not too dry. So just like to add that as well.

Cool. Thank you very much.

Paul Massoud; Stifel.

I guess I wanted to ask a couple of questions. The first is, I'm curious, we're seeing South American currency is weaker against the dollar and we're starting to see a creep up in imports of grain and oil seeds into the US. And so I'm wondering how that might be affecting your business right now. I mean, certainly we're seeing it in [basis] figures. And you talked about the first half of the year being weak. But if the inventory levels as soon to be the case, is this something that could really extend into the second half of the year?

Obviously a strong dollar and weak export numbers and the status of the Chinese as the major importer is a big consideration for the entire grain industry. And in our case it's a little bit more unique in the Eastern Grain Belt and our important focus on wheat is not as specifically tied to the export flows. There's good opportunities for us as we get into the wheat season.

I think if we have good kind of crops that John just mentioned there will be a return for value for space. As you know, the farmers had very strong income in recent years and built on-farm storage. But this last year, on-farm storage was only up just over a percent. And if we get to normal yields in our crops, if we get a trend yield of 1.5%, there will be more of a value to off-farm storage.

So there could be opportunities, given a good crop, for grain handlers and storage this coming season.

Thanks for that. I guess my only other question is just on the ethanol industry. It's still very fragmented. You're talking about some of the weakness that you're seeing in your portfolio, but you are expanding a little bit.

How do you see this industry evolving over the next few years? Are you expecting to see some consolidation in the business? Now, there's some questioning about whether or not some of the larger players might be looking at different strategies for some of their lower margin facilities. So I guess, just looking at the business, do you see consolidation from here? Is this something that you're interested in looking at? Any color there would be helpful.

Yes, thanks, Paul. It's a good comment. Obviously when you have difficult times like we've had in ethanol margins of late, that causes a lot of concern. And there's some new entrants and some that aren't as well capitalized. There will likely be assets that will trade, I would say, in the coming year or so.

There might be some consolidation, as you mentioned. I couldn't speak to any particular competitors and their strategic plans.

We are going forward with our plans for the expansion in Albion, Michigan. That will be complete in the first half of 2017. We feel Albion's a little bit unique because it's well positioned in a market that's a truck in, truck out in a market that's ethanol deficit in Michigan. And we have a great partner in Marathon. So we feel we're well positioned there.

There might be opportunities for us to look at. We're being cautious and trying to focus on operating as lean and efficiently as we can and getting best throughputs we can through the assets we have. But, as you mentioned, we'll kind of see how the next couple years play out in the marketplace.

Thanks.

Brent Rystrom; Feltl and Company.

Out of curiosity, on your acres expectations for corn at 90 and soybeans at 84, we're having a lack of a bidding of acres process right now. So when you look at corn versus beans, the economics in beans right now are a little bit better, in fact, quite a bit better than corn. I'm curious what you see happening that would cause both to go up at this point.

Well, as we mentioned earlier, so wheat acres are down a little bit. There's a little bit of fight about what's the best economics to see on the farm. As you mentioned, corn/bean spreads have moved a little bit.

What I've seen of recent years, the switching isn't as much as we used to see back in the old days. With the agronomics and the GM corn feed availability, people really make these decisions much earlier. And I think those are pretty much set in a lot of cases. And this idea to see dramatic switching late in the harvest is unlikely unless we have some major weather events. That's the thing that have changed acres in the past.

Good news this year, consistent weather across the entire Grain Belt, with ample moisture. So all we need is a really nice weather pattern to get planting in. And we've seen this also -- it doesn't need a lot of time anymore to get the crops planted. You get a week of nice weather and we can -- the American farmer is pretty amazing right now.

So I don't think we'll see major shifts, would be my opinion.

Great. Thank you.

Thank you. And I'm showing no further questions at this time. I would now like to turn the call over to Mr. Jim Burmeister for closing remarks.

Thank you, Chanel. We want to thank everyone for joining us this morning.

We also want to mention that the presentations will have appendix slides when we post it on our investor relations -- on our section of our website at andersonsinc.com.

Please also see the website in the near future for details on our planned celebration of our 20th year as a public company listed on the NASDAQ exchange. Our leadership team will be ringing the opening bell on February 24 and then we will host a webcast at 1:00 p.m. Eastern Standard Time, at which Pat will discuss in more detail his early impressions of the state of the Company and provide further outlook for the Company's near- and long-term strategic opportunities.

Our next earnings conference call is scheduled for Thursday, May 5, at 11:00 a.m. Eastern Standard Time to review the first quarter's results. We hope that you're able to join us at that time. Until then, have a great day.

Ladies and gentlemen, thank you for participating in today's conference. This concludes today's program. You may all disconnect. Everyone have a great day.